House prices: more than four in ten home sellers are reducing initial asking price by 5%, according to Zoopla
Real estate company Zoopla said that the reduction in prices is a sign that rising mortgage rates are hitting the housing market
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More than four in 10 home sellers are reducing asking prices by more than 5% in a bid to sell their houses, according to real estate company Zoopla.
In a new report by the housing website, it was found that 42% of its sellers are having to reduce their asking prices as rising mortgage rates hit the housing markets. It added that the rate of reduced prices in June were the highest that Zoopla has recorded since 2018.
In addition to more than four in ten reducing prices by more than 5%, 15% of sellers are reducing their initial asking prices by more than 10%.
Mortgage rates are continuing to skyrocket in the UK, after the Bank of England announced a new base interest rate of 5%, up from 4.5%. This has knocked onto mortgage rates which are currently at a seven-month high.
Zoopla’s report said: “Our view remains that 5% mortgage rates represent a tipping point, beyond which house prices will post annual price falls with lower sales volumes.”
It continued: “The sales momentum over (the first half of 2023) is not going to be maintained into (the second half). Higher mortgage rates will hit buying power and squeeze more buyers out of the market, bringing a return to modest quarterly price falls.”
The report also showed that 70% of sales were being made to buyers who were relying on mortgages in order to purchase property. This, combined with the rising interest rates, have resulted in fewer potential buyers on the market, with less recorded in recent weeks compared to the same time period in 2022.
Zoopla has said that these conditions could lead to a situation where the housing market is suddenly flooded with a supply of homes, with signs already showing that the availability is starting to grow at an above-average rate. While mortgage lending appears to be slowing, this could lead to better bargaining power for buyers who could negotiate a cheaper price for more properties.
Areas which have run above the average for sales being agreed are in the "most expensive markets, and those where prices have risen the most in recent years, where future price falls are likely to be concentrated". This included sales in Scotland, the north east of England and in London.
The east of England, the south west, the south east and the east Midlands have seen higher concentrations of house prices being reduced in order to secure a sale for those putting properties on the market.
The government has been pressured to help those with mortgages or looking to secure a mortgage as interest rates continue to increase, with Chancellor Jeremy Hunt introducing a new mortgage charter. Among the measures introduced, borrowers will be able to switch to an interest-only mortgage for six-months or extend their current mortgage to reduce monthly payments for six months.
Richard Donnell, executive director at Zoopla, said: “Modest price falls will resume in the second half of 2023 as the supply of homes increases, giving buyers more choice and room for negotiation on price.
“We still expect house prices to be 5% lower over 2023 and there is a very substantial equity buffer to absorb price falls which are likely to be concentrated across southern England.
“Demand for homes remains but those households looking to move home in 2023 need to be very realistic on pricing and get the view of agents on where to pitch their asking price to secure a sale.”